2006 (2) TMI 613 - HC - VAT and Sales Tax

Summary

Issues:
1. Recovery proceedings against a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985 without obtaining consent from the Board.
2. Jurisdiction of the respondent to resort to recovery proceedings as per section 22 of the SICA Act.

Analysis:
Issue 1:
The petitioner, a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985, filed a writ petition to quash the recovery proceedings initiated by the respondent for tax arrears without obtaining consent from the Board. The petitioner had been declared a sick unit and a rehabilitation scheme was being considered. The Board for Industrial and Financial Reconstruction (BIFR) had ordered winding up of the company, which was appealed before the Appellate Authority for Industrial and Financial Reconstruction, and stay orders were granted. The respondent initiated recovery proceedings without obtaining consent from the Board, contrary to the provisions of the SICA Act. The court, citing the Supreme Court judgment in Tata Davy Ltd. v. State of Orissa, held that coercive recovery of tax arrears from sick industrial companies without Board consent is impermissible. As the respondent failed to obtain consent from the Appellate Authority, the recovery proceedings were deemed arbitrary and illegal, leading to the quashing of the same.

Issue 2:
The respondent argued that despite the proceedings being against the provisions of section 22 of the SICA Act, they could seek permission from the Appellate Authority for recovery. However, the court emphasized that the statutory requirement of obtaining consent for recovery from sick industrial companies was mandatory, as per the Supreme Court's ruling. The court highlighted that in the absence of consent from the Appellate Authority, the respondent's actions were unauthorized. The judgment clarified that the respondent should have approached the Appellate Authority for consent before initiating recovery proceedings, which was not done in this case. Consequently, the court quashed the recovery proceedings and allowed the writ petition, with an option for the respondent to seek consent from the Appellate Authority for further action.